In response, IT vendors have outlined major initiatives to help enterprises automate the data center and increase flexibility by allowing resource sharing. Some of these are listed below.

Sun: N1
Computer Associates: On-Demand Computing Initiative
IBM: E-Business On-Demand
HP: Adaptive Enterprise
Veritas: Building Blocks for Utility Computing Initiative
Fujitsu: Treole

While each of the vendor initiatives carry different monikers, their overall strategy appears to be similar. Each vendor offers an evolutionary approach which starts with simple data center automation and progressively moves to a data center environment in which all resources and applications are virtualized and contain a high degree of self-management capabilities.

To achieve these goals the major IT companies have opted for strategic acquisitions to complement and expand their technology and product portfolio. The tempo of acquisitions by large systems vendors has increased in the recent months. In the third quarter 2003 there were half a dozen acquisitions in this area. Over the last 12 months there have been deals worth almost 1 billion dollars. For example, Sun recently acquired Center Run to complement its earlier acquisitions of Terraspring and Pirus. IBM has acquired ThinkDynamics while Veritas scooped up Jareva.

This wave of acquisitions has focused on automating the management, provisioning and sharing of various data center hardware resources. However, what remains glaringly missing is the ability to dynamically allocate resources to applications based on pre-defined policies and real-time business needs. Or stated another way - the on-demand aspect of computing is still missing in the existing offerings. In Sun N1's evolutionary path this is Phase 3 and referred to as Policy-based Automation; IBM considers this Level 5 or the Autonomic Level of data center management; while at Computer Associates this is Phase 4 and is referred to as Business-driven Infrastructure Management.

We believe this sets the stage for major systems vendors to start a new wave of acquisitions centered around policy-based application management and application virtualization - elements that exist in a few startups but are most prominent in Ejasent, a 4-year old technology company based in Mountain View, CA.

Ejasent has developed a broad suite of products that provide just-in-time application availability through its policy-based application management. Central to this capability is the company's application virtualization technology, which provides an abstraction layer between applications and the underlying infrastructure. This allows applications to be deployed to pools rather than specific servers, to be invoked or revoked in seconds upon demand, to be migrated from a maxed out 2-way server to a 4-way server while maintaining session state and user connections, all of which results in significantly higher utilization of computing resources and optimized balance between availability and resource allocation. What distinguishes Ejasent's technology in particular is its support for complex, multi-tiered, enterprise applications (e.g. databases or complex ERP applications). Ejasent has filed for over a dozen patents around its virtualization, connection migration, and policy management technology within its UpScale product, which we believe to be quite unique.

The company also has a complimentary metering and chargeback product, MicroMeasure, that it claims to be the only one on the market that monitors usage of the difficult to measure logical resources (e.g.: application usage, transactions, i/o, throughput, etc.) in addition to the typically measured physical computing resources (e.g.: CPU, memory, and storage).

Some other likely acquisition targets that we believe belong to this wave include VMware, a Palo Alto, CA private company that provides virtualization through its virtual machine technology; Opsware, the famed Marc Andreessen public company headquartered in Silicon Valley; and Egenera, a Marlboro, MA company that provides a virtualization solution coupled with an increasingly-popular blade server architecture. Given the expected size of the Utility Computing market, and the current level of focus by major platform and software players, we expect that only a few (if any) of these companies will remain independent over the next couple of years.

Ejasent has developed a strategy to go to market solely through partnerships with large system vendors which is giving the potential acquirers the ability to closely evaluate the company’s technology and products. In our discussions with members of Ejasent’s management team, the company believes that it can successfully continue to build a stand-alone business. However, our view is that Ejasent's technology seems to strategically fit into many platform companies' near-term Utility Computing roadmaps.

It wouldn't be surprising if one of these large system vendors acquired Ejasent to round out its current product portfolio. With enterprise customers demanding comprehensive utility computing/on-demand solutions, we sense a certain level of urgency amongst the major systems vendors to bolster their product and technology portfolios both to satisfy customer requirements as well as gain a substantial competitive advantage.

Ahmar Abbas is Managing Director of Grid Technology Partners, a vanguard market research and consulting firm focusing on global utility and grid computing opportunities. Abbas is the author of the Global Grid Computing Report 2002/3, Autonomic Computing Report 2003 as well as the forthcoming book Grid Computing - A Practical Guide to Technology and Applications (Charles River Media, Summer 2003).